Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

MGIC Investment Earnings: An Early Look

Let's look forward to this company's next earnings report.

Earnings season is now starting to wind down, with most companies already having reported their quarterly results. But there are still some companies left to report, and MGIC Investment (NYSE:MTG) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, kneejerk reaction that turns out to be exactly the wrong response to the news.

MGIC Investment has had a tough time ever since the mortgage-insurance market tanked during the financial crisis. The road back for MGIC has been long and difficult, and it's still uncertain whether the progress the company has made will pay off for investors in the long run. Let's take an early look at what's been happening with MGIC Investment over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on MGIC Investment

Analyst EPS Estimate

($1.77)

Year-Ago EPS

($0.67)

Revenue Estimate

$322 million

Change From Year-Ago Revenue

(28%)

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

Will MGIC Investment join in the housing recovery?Analysts have been guardedly optimistic about MGIC's prospects, although they've whipsawed their estimates for the just-finished quarter. A couple of months ago, they narrowed their loss projections but have widened them out somewhat in the past week. The stock, however, has rocketed higher by more than 55% since late November.

The recent rebound in the housing market has led to a major reversal of fortune for mortgage insurers. As home prices have risen, an estimated 2 million homeowners have emerged from formerly being underwater on their mortgages last year. That translates to less potential liability under mortgage insurance policies, and that has helped boost MGIC's prospects.

Moreover, mortgage insurers are facing less competition from government-sponsored guarantee programs. The Federal Housing Administration boosted its insurance presence during the financial crisis, but it has recently raised fees to shore up its own finances and to encourage the private insurance market to resume its traditional role. MGIC competitors Radian Group (NYSE:RDN) and Genworth Financial (NYSE:GNW) have both reported gains in business volume, presumably at the expense of the FHA and other government programs, and MGIC should also benefit from that trend. Moreover, Arch Capital has decided to enter the business, leading to potentially even more competition.

In its quarterly report, watch especially for MGIC to discuss the current status of its dispute with Bank of America's (NYSE:BAC) Countrywide unit. In its previous quarterly report, MGIC said it was in mediation to resolve the dispute, and with a recent decision in favor of fellow insurer Assured Guaranty in a similar case against a bank, MGIC may have better standing to get a favorable settlement and move forward.

Click here to add MGIC Investment to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Author

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
Follow @DanCaplinger